How ASC 606 Impacts Your Company
In 2014, the Financial Accounting Standards Board (FASB) issued the Accounting Standard Update 2014-09. It introduced ASC 606, which was a game-changer for companies of all sizes.
ASC 606 is one of the most significant accounting changes to hit the U.S. capital market in many decades. While it deals with accounting, can it impact your company? According to the revenue recognition webinar, it can drastically change how you conduct business. Click here for more information about an upcoming revenue recognition webinar.
Read on to learn how.
What is ASC 606?
ASC 606 is a new set of standards for recognizing revenue from contracts and customers. It's a pretty complex change, but the central theme is relatively simple. It all revolves around how companies recognize what's considered revenue.
With ASC 606, revenue is when goods or services are transferred to a customer.
How ASC 606 Impacts Business
The new definition of revenue seems simple enough if you're dealing with tangible products. However, digital products are different.
Services change all the time, and subscriptions are becoming commonplace. SaaS is a big deal in technology, and it's an ever-evolving industry. The issue here is that subscription details are challenging to handle. Revenue comes from many sources, and now companies have to figure out if they want to recognize revenue right away or defer it.
This rule change could change the way you conduct business and how your organization recognizes things like sales and subscription fees. It will significantly increase the amount of data companies must disclose about where their revenue comes from.
Any organization with recurring revenue must now go back to the drawing board. Many larges companies are investing millions into changing how they record revenue. Some businesses are looking to defer revenue and redefine how they disclose it. Others are revamping compliance altogether.
It's a significant change poised to impact a wide range of businesses. While the shift is somewhat extreme, there is a light at the end of the tunnel. Many progressive companies are turning to automation to handle finances. That's resulting in recast revenues and more streamlined ways of doing things.
Check out the revenue recognition webinar to learn more about ASC 606 and how it impacts your business.
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